Denny’s sees softness in consumer spendingDenny’s sees softness in consumer spending

Denny’s Corp., parent to the family-dining brand and the Keke’s daytime café concept, found consumer spending trends soured in the first few weeks of this year, executives said Wednesday.

“Both brands benefited in the back half of the year from consumer stabilization as optimism rose and spending normalized,” Kelli Valade, Denny’s CEO, said in a call with analysts after releasing earnings for the period ended Dec. 25. “Weare a bit disappointed that trends have since softened to start 2025.”

Robert Verostek, Denny’s chief financial officer, noted that 2025 dawned with a feeling of consumer stabilization and normalcy.

“This was even in the face of horrific wildfires and snowstorms spanning across the U.S. and even into the Deep South,” Verostek said. “Yet there has been a shift in consumer sentiment and a slowing that persisted through the remainder of January and has seemingly accelerated in the last few weeks given the evolving macroenvironment.”

Valade said Denny’s maintained positive same-store sales of 1.1% in the fourth quarter, while Keke’s generated same-store sales of positive 3%.

Denny’s, which brought back the $2-$4-$6-$8 value offering in August, was well positioned to weather economic turbulence, she added.

That platform was “profitable for our franchisees and our system. This brand differentiator was an instant hit and continues to perform well because our guests recognize and appreciate the great value we are providing to them,” Valade said.

The company also expanded its Banda Burrito virtual brand, its third with The Meltdown and the Burger Den, to nearly 1,000 Denny’s units, providing late-night off-premises options.

“Denny’s is uniquely positioned to build a sizable virtual brand business given our labor structure and these transactions over indexing at dinner and late night when we can leverage our labor line to generate incremental profitability for the system,” Valade said. “Plus, we see less than 1% overlap between guests that use our virtual brands and those that are in our dining rooms. So, these brands are delivering incremental sales volumes and margins.”

Keke’s, like Denny’s, had several initiatives in the final testing stages during the first half of 2024, Valade said, “and now we’re starting to see those results. These included the beverage program rollout, incremental marketing investments, and the expansion of their off-premises business. And while we’re pleased with same-restaurant sales of positive 3%, it’s important to note that this would have been 4.1% positive absent the impact of Hurricane Helene and Milton in Florida, as many of our cafes were in the path of these back-to-back hurricanes.”

Verostek said Denny’s still plans to accelerate the closure of lower-volume Denny’s restaurants to improve the cash flow for franchisees.

“As such, we expect to close between 70 and 90 restaurants, which includes some closures related to lease expirations,” he said.

During the fourth quarter, Denny’s opened four franchised restaurants and 14 total in 2024.  

“As part of our previously communicated strategy to accelerate the closure of lower-volume restaurants, Denny’s closed 30 restaurants during the fourth quarter and 88 for the full year,” Verostek said. “These closures had an average unit volume of slightly under $1.1 million and were open on average for nearly 30 years.”

Keke’s expanded its remodel test to two additional company cafes during the fourth quarter.

“Thus far in 2025, we have opened three new cafes and expanded to our seventh state, Georgia,” Verostek said. “Additionally, subsequent to year-end, we terminated two Keke’s franchise agreements impacting 11 cafes. Keke’s corporate has assumed operation of five locations with the intention of keeping three to maximize oversight efficiencies in the Orlando market and refranchise two.”

He said four of those Keke’s cafes have been temporarily closed, and they are expected to reopen in the near term.  Two were permanently closed due to trade area shifts and low-volume sales.

For the fourth quarter ended Dec. 25, Denny’s net income was $6.8 million, or 13 cents a share, compared to $2.9 million, or five cents a share, in the prior-year quarter. Revenues were $114.7 million, compared to $115.4 million in the same period a year ago.

“While there is some near-term choppiness, we are confident that the steps we are taking will enable us to continue to meet the guest guests where they are and create shareholder value,” Valade said.

As of Dec. 25, Denny’s had 1,568 restaurants, 1,493 of which were franchised and licensed restaurants and 75 of which were company-operated. Of those, 69 were Keke’s units.

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